What Ratio Helps to Measure the Risk Involved in Financing

question 40

Multiple Choice

What ratio helps to measure the risk involved in financing a business with borrowed funds?

• A)Asset turnover ratio
• B)Current ratio
• C)Interest cover ratio
• D)Profit margin ratio

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Definitions:

Absolute Value

The value of a number without regard to a plus or minus sign.

Horizontal Change

Alterations or movements that occur parallel to the x-axis in a coordinate system, often reflecting changes over time.

Opportunity Cost

The cost of the next best alternative foregone when a decision is made.

Production Possibility Frontier

A curve depicting the limit of attainable outputs for two or more products given a fixed set of resources, showing the trade-offs in production choices.